Unfunded Loan Commitments

9 Months Ended

Sep. 30, 2022

Credit Loss [Abstract]

Unfunded Loan Commitments

Unfunded Loan Commitments

When we approve a Private Education Loan at the beginning of an academic year, that approval may cover the borrowing for the entire academic year. As such, we do not always disburse the full amount of the loan at the time of such approval, but instead have a commitment to fund a portion of the loan at a later date (usually at the start of the second semester or subsequent trimesters). We estimate expected credit losses over the contractual period in which we are exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by us. See Notes to Consolidated Financial Statements, Note 2, “Significant Accounting Policies - Allowance for Credit Losses - 2021 and 2020, — Off-Balance Sheet Exposure for Contractual Loan Commitments - 2021 and 2020” in our 2021 Form 10-K for additional information.

At September 30, 2022, we had $2.2 billion of outstanding contractual loan commitments that we expect to fund during the remainder of the 2022/2023 academic year. The tables below summarize the activity in the allowance recorded to cover lifetime expected credit losses on the unfunded commitments, which is recorded in “Other Liabilities” on the consolidated balance sheets, as well as the activity in the unfunded commitments balance.

	2022				2021
Three Months Ended September 30, (dollars in thousands)	Allowance		Unfunded Commitments		Allowance		Unfunded Commitments
Beginning Balance	$	113,525	$	1,413,840	$	64,772	$	1,161,696
Provision/New commitments - net(1)	192,559		3,148,434		129,904		2,885,024
Other provision items	(29,913)		—		15,068		—
Transfer - funded loans(2)	(168,377)		(2,345,348)		(110,613)		(2,083,128)
Ending Balance	$	107,794	$	2,216,926	$	99,131	$	1,963,592
	2022				2021
Nine Months Ended September 30, (dollars in thousands)	Allowance		Unfunded Commitments		Allowance		Unfunded Commitments
Beginning Balance	$	72,713	$	1,776,976	$	110,044	$	1,673,018
Provision/New commitments - net(1)	339,705		5,584,129		218,304		4,963,789
Other provision items	(1,033)		—		32,831		—
Transfer - funded loans(2)	(303,591)		(5,144,179)		(262,048)		(4,673,215)
Ending Balance	$	107,794	$	2,216,926	$	99,131	$	1,963,592

(1)     Net of expirations of commitments unused.

(2)     When a loan commitment is funded, its related liability for credit losses (which originally was recorded as a provision for unfunded commitments) is transferred to the allowance for credit losses.

The unfunded commitments disclosed above represent the total amount of outstanding unfunded commitments at each period end. However, historically not all of these commitments are funded prior to the expiration of the commitments. We estimate the amount of commitments expected to be funded in calculating the reserve for unfunded commitments. The amount we expect to fund and use in our calculation of the reserve for unfunded commitments will change period to period based upon the loan characteristics of the underlying commitments.